Explain risk and liquidity of assets
What will be an ideal response?
Risk is the variability an asset contributes to a savers' wealth. An asset's real return can be unpredictable and savers dislike this uncertainty if the return fluctuates widely. Liquidity refers to the ease with which an asset can be sold or exchanged for goods. Cash is the most liquid of assets because it is always acceptable at face value as payment for goods or other assets. Thus, savers consider an asset's liquidity and its expected return and risk in deciding how much of it to hold.
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Economist Richard Baldwin says the optimism about the Eurozone may be unjustified. His research suggests trade increases in the Eurozone as a result of the currency union:
A) are much larger than previous estimates or forecasts and likely to show future gains. B) are much smaller than previous estimates or forecasts and unlikely to show future gains. C) are less stable and subject to wide variations. D) could be much larger if poor and unstable economies were not in the Eurozone.
If it is easy to uncover buy and sell orders above and below current transactions prices, a market is said to
A) be primary. B) lack breadth. C) be deep. D) be resilient.